Wednesday, 12 October 2016

Asia’s Best Debater’s Logic

He was implying that the delay in payments of allowance to matriculation students were because of 1MDB by tweeting the picture of press statement by the Ministry of Education (MOE).

He also implied that the cuts in university budgets and scholarships were because of 1MDB.

As he’s very popular on social networks especially among the youth, his tweet got retweeted by more than 900 tweeters, most likely his followers.The problem with that tweet is, it’s factually incorrect, misleading and without basis.I have replied to him with a few tweets with facts but so far he hasn’t replied to me yet but I got a reply from one of his fans instead:

How did he arrive to the conclusion that 1MDB is the reason why the allowance for matriculation students were delayed?

Let’s presume that he thought the government has used some money from its coffer (Federal Consolidated Fund) or how some people like to call it, taxpayers money, to pay for 1MDB expenses or debts.

As a matter of fact government has never spent a single cent to bail out 1MDB from its mess except for an extension of standby credit of RM950 million in February last year which had been fully repaid by 1MDB in April earlier this year:

Other than that government has never spent a single cent to bail out 1MDB or to pay for 1MDB debt.

If Syed Saddiq has any proof or evidence to show to me that the government has spent taxpayers’ money to bail out 1MDB, I urge him to publish it on Twitter or FB.

Syed Saddiq must have thought that the debt accumulated by 1MDB could’ve been better spent on education, health or other social expenditures.

What Syed Saddiq doesn’t know is, spending for scholarships, university budgets, allowance for students are financed by government revenue not from borrowings.

Debt accumulated by 1MDB via borrowings were meant for asset purchases, land development and investments although it’s been alleged that part of the proceeds from the debt issuance by 1MDB has been diverted to some other people’s accounts and used for something that wasn’t originally planned by 1MDB.

If those proceeds from the debt issuance were really siphoned off as alleged, let’s hope the perpetrator will be detained, charged and tried in court, and convicted.

But that’s a matter for another day and let’s get back to the core issue which is government finance.

Government does not issue debts to fund operating budget which includes student allowances, scholarships, university budgets, hospital budgets etc.

It’s not right to say that 1MDB debts could have been better used for the said spending because debt, is debt and such spendings under operating budgets are financed by government revenue, not debt.

So why did we hear about allowance for matriculation students being delayed and all that?

As we all already know, government finance has been hit by the plunge in oil price that started in the second half of 2014.

Government petroleum revenue which consists of Petroleum Income Tax (PITA), Petronas dividend, royalty and export duty have been decreasing quarter after quarter since last year.

The drop of RM20billion in petro-revenue has been almost offset by the implementation of GST which government collected around RM27 billion in 2015:

Petroleum and Consumption Tax Revenue

And that was last year when total government revenue dropped slightly to RM219 billion ringgit from RM220 billion collected in 2014:

Government Revenue and Operating Expenditure Statement

Operating Expenditure (OPEX) which includes salary for government staff, pension payments, scholarships, allowances, university budgets also dropped to RM217 billion last year from RM219.6 billion in 2014.

How about this year?

So far things haven’t improved as the effect of falling oil price is lagged by couple of quarters and this year government is facing the full impact of lower petro-revenue as in the first half of 2016, PITA collection dropped to just RM2.9 billion from RM6 billion in the first half of 2015 and RM12 billion in 2014 which is a 50% drop from the first half of 2015 and a staggering 75% drop from the first half of 2014:

Even GST collection in the second quarter of 2016 dropped to RM7 billion from RM10 billion collected in the first quarter of 2016.

Government GST Collection

That’s probably because the slowing growth in private consumption (still growing but at slower rate) in the last quarter.

GST will still offset the fall in petro-revenue this year but not fully as last year.

This put government finance in tight condition and that’s why we are seeing some of the budget has been recalibrated by some ministries including MOE in order to optimize the allocated expenditures.

Other revenue such as individual income tax, corporate income tax, dividends from investments have also dropped this year and that has put even more strain on already tight government finance.

Nevertheless, things are expected to get better for the rest of the year and next year.

Oil prices have rebounded from its multi-year low of US$25 per barrel to US$50 per barrel currently.

We can expect the strain on government finance to be at least eased next year.

Oil prices are something that are beyond government’s control and certainly beyond 1MDB’s control.

It’s not that government won’t be paying allowances to the students affected but it’s been delayed for a while as stated in the press statement by MOE.

Blaming 1MDB for the delay of allowance payments for matriculation students is not just absurd but also intelectually dishonest on Syed Saddiq’s side.

It’s unfortunate that some of the students are affected by the tight condition in government’s finance but it’s more unfortunate that some people use this as a political capital to attack the government and mislead the masses.

During the Asian Financial Crisis in 1998, government cut scholarship budgets and higher education budgets due to the falling government revenue.

I wonder if the government got blamed by the cuts in scholarships and higher education budgets back then.

Maybe there’s someone who blamed the cuts on Mahathir’s cronyism and nepotism practice before the Asian Financial Crisis.

But on a serious note, no.

The government has to cut education budget and scholarships back then because its revenue was decreasing during the crisis.

Just like today’s cut, it’s because government needs to do adjustment to optimize the budget allocation.Dear Syed Saddiq, please learn some basic of government finance for example government revenue, operating expenditure, development expenditure etc before you talk about anything it.

For someone of your stature, you should have use facts and figures to prove your points, not sentiment.

If you have anything to reply or to prove that 1MDB has affected government’s finance, please do so because I cannot wait to see the factual response from the Asia’s best debater.